Wednesday, April 28, 2010

GOP Capitulates, Finance "Reform" Bill Moves Forward

The timely leak of the SEC lawsuit against Goldman Sachs and a circus of the Senate hearing the other day over a CDS whose main buyers (two) were both large institutional investors who knew the risk have resulted in GOP capitulating to the "public opinion" (according to the article from Huffington Post, which has a photo of jubilant Chris "friend of Angelo" Dodd..ugghh) and agreed to proceed with the debate of the bill on the floor.

If the public do support this bill that no one has read, I'm so close to giving up and rolling over.

What's hilarious about this so-called "reform" to me is this:

"The bill would establish a nine-member Financial Services Oversight Council, including the treasury secretary, Federal Reserve chairman and the heads of regulatory agencies to monitor markets for threats, such as the bubble in housing prices and mortgage-backed securities that preceded the financial near-collapse two years ago."

In other words, people who didn't have a clue that anything was amiss until the collapse in 2008 would be put in charge of monitoring the market threats. Either they would deem any activity as "threat" or they wouldn't see a "threat" at all, just like before. And we would be paying for these people and their soon-to-be-created new bureaucracy of supporting staff members and outside so-called experts who didn't see anything coming either.

Besides, I think I know what the next bubble is, and the government council would do its best to ignore: US sovereign debt bubble, which is already happening. Or worse, as more and more people move their paper assets to physical assets like gold, they would designate that flight to safety as "bubble" and restrict people from buying and/or holding gold.

Also under this "reform" bill, the Federal Reserve would have more power to do ... what? Do we know what they do? Not really, because they refuse to tell us anything, other than it (whatever it is) is a "national security":

"The Federal Reserve would begin policing large bank holding companies and interconnected nonbank institutions whose collapse might pose a threat to the economy. With approval of the council, the Fed could even break up complex companies that posed a grave threat."

The gravest threat is the Fed itself, particularly under this reckless chairman who doubled the balance sheet in one short month and refuses to tell us what he used it for.

Democrats may or may not drop $50 billion bailout fund to be managed by the insolvent FDIC, but the consumer protection would be another Federal Reserve's job. As far I have read, the definition of "financial" activity is extremely broad; any business extending credit to customers could be classified as "financial" firms and under the regulation and policing by the Federal Reserve.

So the small council to decide what is risky, the privately-held central bank with hardly any transparency to police the country's financial activities - the federal government would be in charge of the most vital part of any country. It would be so unlike America that the world has known. East Europeans and Russians must be shaking their heads in disbelief.

If the money and capital don't flow freely in and out, the country dies. Death may be slow, but it comes surely. Just like the body dies if the blood stops circulating. But this government doesn't seem to care for free-market capitalism that requires free flow of money and capital; it opts so readily for crony capitalism in which the people and big corporations who are well-connected with the government officials benefit and dominate.

This financial "reform" is no exception. Under this bill, anyone who wants to invest in a promising startup will be required to have either annual income of $450,000 minimum or net worth of $2.3 million minimum. In other words, only rich people need to apply. If a grandma wants to give $10,000 to her grandson's garage startup, unless she's that wealthy, the government wouldn't allow her. And the grandson would have to wait for 4 months to see if his application to the SEC to raise funds has been approved by the bureaucrats. For more, see my post from April 9.

And remember, Goldman's CEO said in the Senate hearing that he supports the bill.

Not that the previous government cared about free-market capitalism, but they at least pretended, and cooked the proverbial pot slowly. But this one, everything it does is "in your face", one after another.

I think I quoted this British Prime Minister before, but I'll do so again:

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves."

Looks like tyrants are winning, and we are being rendered slaves.


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